OK, taxes are up, now what?

It was a foregone conclusion that the “Graham tax cuts” would be rolled back. Simply put, that revenue reduction was never matched with either expenditure restraint or new revenues and so something had to give. Two successive New Brunswick governments held their breathe hoping the global economy would bail them out, and it did not. So taxes are back up, and New Brunswick, as the government so proudly proclaimed on budget day, is once more the “best of the worst.” New Brunswick will have the lowest tax rates in eastern Canada. Regrettably, eastern Canada has the highest taxes on the continent.

The question now is; what’s next? Here are five suggestions.

One, look west young maiden (or man, or old person for that matter). The west-east pipeline is a great idea and the economic case will drive it as far east as the profit will allow. New Brunswick is and should continue to be an active cheerleader on that file. But they can do more, like sign on to the New West Partnership, and sign on to it today. Suggestions have been made for a “New East Partnership,” but who do you want free trade with, a burgeoning, rich, populous group of provinces, or a group of provinces that collectively are still struggling to find and keep immigrants and to grow their economies? Besides, if you get free trade with Alberta and B.C. and Saskatchewan, I assure you, free trade with Nova Scotia will not be far behind.

Two, keep on cutting. The commitment to continue to seek efficiency and to fill only “critical” public service positions is well made, and so far has been well kept. The promise to focus on needs, not wants, was abandoned quickly, but should be resurrected. As the federal government proved in the mid-1990s, the correct question to ask is what must government do, not how does it do everything it is doing now more efficiently? Equally important is the more recent lesson from Ottawa, that restraint is temporary unless institutionalized. That means looking seriously at models of permanent cyclical program review – things like sunset clauses on all new spending, and mandated reviews of all existing spending, legislation and regulation. The call for value-for-money audits by the Auditor General is one such tool, but it also, disappointingly, passes off the Legislature’s duty to be the ultimate steward of the public purse.

Three, invest in infrastructure. Additional funds for early childhood intervention is, again, a good start here, as are New Brunswick’s road networks, the discussions of pipelines, and the efforts to develop an enhanced electricity grid. New Brunswick is a crossroads, and as such there is money to be made by having world-beating infrastructure. IT infrastructure, for instance, is being upgraded around the globe; New Brunswick (and indeed the rest of Canada) cannot afford to fall behind.

Four, revisit the tax advice that started all this in the first place. Recall Dr. Jack Mintz was invited to suggest a tax structure that was most likely to encourage economic growth for the province. His answer, as with countless economists before him, was to raise consumption taxes and lower income taxes while increasing the flow of transfers directly into the hands of the most marginalized in society through an enhanced New Brunswick HST rebate. That advice is still valid today. Indeed, after analyzing the evidence from countries around the world, the OECD continues to promote that model as the single most effective tax policy any government can take.

Five, invest in people, not enterprises or organized interests. In looking at the HST, seriously consider raising it by three points instead of two. Those funds should not go into the coffers of the public service unions or the business lobby, but into the hands of New Brunswickers who need a helping hand to fully engage in the economy. That means spending items that make work possible for some, and more attractive to others: a New Brunswick working income tax benefit, a New Brunswick Universal Child Care Benefit, a New Brunswick enhanced HST rebate. One of the key recommendations of the old “self-sufficiency” task force was that New Brunswick employers should make work more attractive by raising salaries. But, as the federal government has understood and successfully acted upon (through their working income tax benefit and their EI hiring credit, for example), not only businesses impact take home pay, and a burden shared is one sooner met.

Expanding trade opportunities, balanced budgets, targeted infrastructure spending, competitive and effective taxation, and help for those who need it instead of for those who have already received lots of it. That’s a plan for all New Brunswickers.

Charles Cirtwill is president of the Atlantic Institute for Market Studies, an independent social and economic policy think tank based in Atlantic Canada.

Read this commentary in the Telegraph-Journal (note: subscription required)